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Mineralstox Gives 6 Reason To Own Gold Stocks Now!
Posted on August 22, 2007
What a wild ride this has been - isn’t gold supposed to be a safe haven? So why were gold and gold stocks hit so hard in the recent sell off in the market place? Gord Zelko from www.Mineralstox.com sent us an article that suggests 6 reasons one should own gold right now and Rusoro Mining, a near term producer, stands out to him as one company that could benefit three fold over the coming months. Thanks Gord for an interesting and timely perspective we appreciate your insight.
Six Reasons Why You Should Own Gold Now
August 14, 2007
History says that mid to late summer is the best time of year to buy commodity stocks (in fact, all stocks). Stocks rally through fall into spring and drop off in summer. This is the shopping season and this year that is especially true for gold stocks.
The traditional summer sell off was late this year, but the opportunity finally arrived three weeks ago with the plummeting of the general markets and gold stock indices across the world.
Now I want to share with my readers 6 reasons why to own gold stocks. Consider these reasons as I expect funds from liquidating uranium and base metals stocks to start flowing into gold and silver and expect them to outperform over the next 12 months. These market fluctuations are just short term noise – please look longer than 6 days down the road for your portfolio to gain maximum percentages as we forge ahead in the biggest resource boom we will possibly ever see in the history of man kind.
6 Reasons to Own Gold Stocks Now!
- Fundamentals for gold and silver haven’t changed (hedge against the US dollar drop, increase in money supply etc.) in fact have only improved. Only investor sentiment has changed – it has obviously transformed from greed into fear – the perfect buying opportunity.
- Corrections in bull markets are increasingly short, steep and painful making you believe it is a bear market (which we just witnessed). We saw the same market action in May 2006, and the market had a huge rally through the fall.
- The USD recently broke a 16 year support level and crumbled – and is now having a dead cat bounce to test the “new” resistance level. It will fail, and when it does gold will rally (we are already beginning to see this). Gold is up over 200% against the US dollar in the last 6 years.
- Sub Prime mortgage market fears in the US have now spread to Europe, and are causing panic among Central Banks - who are opening up the vaults to flood the system with liquidity – gold always does well during these periods of high liquidity.
- This new liquidity will feed inflation. Never in history have these artificial liquidity injections not created a strong inflationary environment – gold is truly the best hedge against inflation. Ask anybody in Zimbabwe, who in the face of 1200% inflation bought gold and have kept their wealth.
- The never ending war for energy – China vs. the US vs. Russia - will create a new permanent geo-political tension that will sustain and increase the investment demand for gold as a safe haven.
In an environment like this, I look for stocks which have improved their fundaments but because of negative market sentiment, trade at favorable valuations. One of the companies that stands out to me is Rusoro Mining (RML-TSXv). I originally profiled Rusoro in December. Since then the share price has suffered but not because of a lack of good news.
Rusoro’s last NI 43-101 report totalled 4M ounces of gold resources They since embarked on one of the world’s largest drilling programs aimed at doubling the resource estimate by the end of 2007. Their new resource estimate is due very soon. The company has reported several very good rounds of drill results which included new ore bodies not expected to encounter and should easily add to the 43-101 ounces in the ground.
Furthermore, few investors realize that RML is now only 4-5 months away from pouring gold. All permits and assets are in place for 100,000 ounces per year starting early 2008, with cash costs of US$225 per ounce.. As they near production, valuations should improve, based on being a producer alone.
Remember, the financial backers of Endeavour Financial have very successfully conducted business in places like Venezuela, Colombia, Kazakhstan, Cameroon for many years now . They would not have helped raise $75M for Rusoro if they thought political issues would get in they way of doing business or the prospects weren’t good enough for a very handsome return. The stock is currently trading around $2.30, much lower than the $3.80 per share where the money was raised.
So we have a company that could benefit three fold:
1. Significantly Increasing compliant ounces in the ground
2. Revaluation as it moves into production from an “explorer” to “producer”
3. Rising gold price environment
Since the beginning of 2007, Rusoro has lost almost half of its share price wiping out $150M market cap valuation. Rusoro’s fundamentals have significantly improved and the fire sale in the market place should not be ignored.
Gord Zelko, Publisher
Mineralstox.com
All statements and expressions are the sole opinions of the editors and are subject to change without notice. This article is neither an offer nor solicitation to buy or sell any securities mentioned. The information is based on information that is public and that we believe is to be factual and reliable and in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. MineralSTOX.com is not a registered investment advisor and does not offer investment related advice.
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